Abstract
The paper investigates the problem of doubtful debts allowance development for the purposes of receivables reflection in the accounting (financial) statements. Comparison of approaches to forming the allowance in compliance with the US, Russian and international accounting standards is fulfilled. It is proved that the allowance of doubtful debts formation should be based on the principle of accounting conservatism. In this case, it is advisable to use the method of accounts receivable aging based on the probability of payment coefficient. This coefficient represents the best assessment by the managers of the possible amount of the accounts left without repayment by the buyers judging from the past experience of relations with the debtors. The steps of forming an allowance are described in detail, basing on the certain procedures fulfillment. DOI: 10.5901/mjss.2015.v6n1s3p448
Highlights
The emergence of receivables is associated with the development of commercial lending caused by a lack of available cash assets
To increase the company's revenues the enterprises were forced to ship the products on the transfer conditions of payment at a later date "on the pledge of the word" of the buyer. This situation can lead to the occurrence of the so-called "bad" debtors causing doubt about the repayment of their debts [1, 2]. For these purposes the allowances of doubtful debts is established for reducing of the amount of receivables reflected in the financial statements [3]
We have developed approaches to the allowance of the doubtful debts formation by implementing certain procedures carried out in stages
Summary
The emergence of receivables is associated with the development of commercial lending caused by a lack of available cash assets. To increase the company's revenues the enterprises were forced to ship the products on the transfer conditions of payment at a later date "on the pledge of the word" of the buyer. This situation can lead to the occurrence of the so-called "bad" debtors causing doubt about the repayment of their debts [1, 2]. For these purposes the allowances of doubtful debts is established for reducing of the amount of receivables reflected in the financial statements [3]. We have developed approaches to the allowance of the doubtful debts formation by implementing certain procedures carried out in stages
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